Ann: CMI Summit Conference Presentation, page-27

UBS Global Research 13 May 2025
Rare Earths
Catching up with Neo Performance Materials
We hosted a call with Neo Performance Materials (NEO: TSX, Not Covered), one of the
few producers of permanent magnets ex-China. They were overall positive on the
outlook and noted a rise in inquiries from their clients seeking to diversify their magnet
sources. Despite, current tariff de-escalation, we remain positive on the medium-term
outlook in line with the team's recent rare earths APAC Focus.
- Global NdFeB demand 'not the problem': NEO reinforced the strong growth
forecast for global magnet demand, driven by the ongoing expansion in electric
vehicles, renewable energy sources, and highlighting the potential humanoid
robot opportunity, which could introduce a substantial and additional source of
demand. They cite industry projections estimating that NdFeB demand could reach
approximately 535kt (around 180kt NdPr) by 2035, nearly three times current
market size.
- Client concerns on supply diversification growing: NEO noted increased
client incomings focused on expanding their magnet supply and not being solely
reliant on China. To this extent, they remain bullish on further capacity additions to
their NdFeB magnet project in Estonia coming online 2025/26. Indeed, despite
China's continued dominance downstream, NEO highlighted increased
momentum elsewhere including Japan where they noted two of the incumbents
were also expanding.
- Cost still king? NEO readily admitted China had a (~20-30%) cost advantage in
producing magnets, however, they argued that the premia for ex-China producers
was relatively small vs the potential ramifications of lack of supply. Further, while
global trade tensions look to be de-escalating, we argue that it is unlikely that we
will revert to old status quo, and that additional tariffs will help with ex-China
competitiveness and ramp-up.
- China maintains dominance but market share could fall to ~70%: NEO
entertained one potential scenario which could see China maintain market
dominance but lose market share to ex-China supply chains from a security
perspective (95->70% market share). This would imply ~35kt ex-China NdPr
demand on our 2030e forecast but we cede it could take longer to see this shift
eventuate and is not without risk.
- NdPr availability fine but DyTb market could get interesting: NEO's internal
China channel checks were comfortable on NdPr availability, with export control
demand uncertainty likely offsetting a reduction in overall NdPr units (due to MP,
Myanmar). However, they were far more constructive on the DyTb outlook,
highlighting prices went 8/14x higher back in 2010/11 when China had last
threatened supply restrictions.